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Opportunity Knocks: Moving to a Digital Economy - AAPT White Paper

This Telsyte report, prepared for AAPT, will provide Australian mid-market and large enterprises with a context of the emerging digital economy.

1. Introduction

In this current phase of the global and local economic recovery, innovation in electronic service delivery enabled by telecommunications will play a pivotal role in distinguishing strong survivors. Businesses that survive in the best condition are likely to be those seeking to leverage technologies to conduct business more cost effectively and find ways to do more with less.

Australian mid-market and larger enterprises (MLEs) need to take advantage of these innovations in order to compete in the global digital economies. Exploitation of the opportunities of the digital economy to the maximum extent requires organisations to consider changing processes to leverage the opportunities. Progressive implementation of change needs to be facilitated in order to develop an ongoing culture of innovation.

2. What is Digital Economy?

The digital economy is much more than an Internet presence, albeit the Internet being the foundation of the digital economy. The digital economy is more about the way in which the Internet (and intranets) is used for supporting economic activity. The digital economy embraces the use of electronic services to create lifestyle enhancements (including health, education and well being), sustainability and wealth1.

The digital economy is the global network of economic and social activities that are enabled by platforms such as the Internet, mobile and sensor networks. The digital economy refers to the devices most of us use each day such as computers, phones and game consoles. It includes the online maps that we consult, the web searches that we do to find information and our electronic banking.

Digital Economy Future Directions Final Report, 2009, Canberra, page iv Department of Broadband, Communications and the Digital Economy

The digital economy impacts our lives increasingly every day. There can be few businesses or government departments or agencies, which could sustain their activity without using electronic services over the Internet. It is an expectation that information and services will be supported by web-based access and those that are not supported in that way run a real risk of losing business or of facing criticism about the standard of service available.

Perhaps of greater interest is that the digital economy is not just the Internet and the means of delivering information in a new form. The digital economy transforms business, delivering better services using new and more effective processes, potentially delivering services more efficiently and adding value/benefits well in excess of the cost of doing so.

The digital economy enables us to be “smarter” hence we now have Smart-infrastructure (e.g. Smart-grid and Smart-home), a branding attached to the digital economy. eCommerce has been with us for many years to which we now add eHealth, eEducation, eGovernment etc., also part of the digital economy.

The digital economy is transformational with the promise of improving lifestyle as well as work. Much of this is beyond the scope of this whitepaper, which provides a foundation for detailed consideration of many of these opportunities.

2.1 Electronic Services

Dramatic changes are occurring in the way in which people communicate and increasingly adopt electronic services, brought about by a variety of factors including:

  • Increased familiarity/skills in utilising Internet-based tools
  • Convenience and increasing variety of services and applications available
  • Greater access to increasing resources of information in electronic form
  • Ability to link context awareness and business intelligence using data mining of de-identified, as well as authorised personal information, to improve service delivery
  • Improved awareness and management of trust, privacy and security
  • Use of mobile solutions with high bandwidth capability
  • Connected services enabling new services delivering added value

2.2 Who Participates?

The digital economy is bounded only by the infrastructure available to support it. The digital economy is truly global in potential. Telecommunications is the fundamental enabler. The better the telecommunications capability available, the greater the level of participation in the global digital economy. Barriers can be created at national boundaries, however, the recognised importance of the digital economy provides ample incentive to find means of breaking down those barriers. We really do have the potential for creating global villages or those virtual villages with participants from across the globe, who share common interests whether they are family, professional or social groups.

3. Why Is The Digital Economy Important?

3.1 What is the Value?

Participation in the digital economy is, for an increasing number of businesses, becoming a matter of economic necessity. Most businesses now realise that to remain competitive and to conduct business efficiently, they must adopt electronic means for business processes. Whether the purpose is for transactions, enabling better interaction with customers, product promotion or being able to conduct internal processes more effectively, businesses are increasingly adopting electronic tools.

It will not be simply a matter of replicating old processes using the new technologies. The new technologies enable new ways of meeting customer needs. Innovation and adaptation will be characteristics of competitive advantage. Electronic services typically enable a greater level of collaborative working, and this in itself is the basis for efficiencies. Change is a major barrier to larger businesses and the adoption of electronic services and new processes places considerable demand on change management.

The rapid adoption of smartphones, as a primary means of communication for an increasing number of people, means that businesses must consider changes which enable the business to address their customers through these new modes, typically requiring new investment in existing information systems.

Businesses will question the value of the digital investments, which will impact the business indirectly in revenue terms. Electronic services deliver users benefits often without any direct revenue impact, which means that benefits are less easily quantified. The consequences of not investing are however not acceptable.

The Seoul Declaration on the Internet Economy2 from the Ministerial Meeting of June 2008 on the Future of the Internet Economy stated that “information and communications technologies (ICT), will strengthen our capacity to improve the quality of life for all our citizens by:

  • Providing new opportunities for employment, productivity, education, health and public services as well as addressing environmental and demographic concerns.
  • Acting as a key driver for the creation of enterprises and communities and stimulating closer global co-operation.
  • Enabling new forms of civic engagement and participation that promote diversity of opinions and enhance transparency, accountability, privacy and trust.
  • Empowering consumers and users in online transactions and exchanges.
  • Reinforcing a culture of security, which applies to information systems networks and their users.
  • Developing an increasingly important platform for research, international science co-operation, creativity and innovation in many different sectors.
  • Creating opportunities for new economic and social activities, applications and services through ubiquitous and seamless access to communication and information networks.
  • Promoting a global information society based on fast, secure and ubiquitous networks which connect billions of people, machines and objects.

3.2 Sustainability and Environment

Interest in the digital economy comes at a time when the awareness of sustainability, with pressure to utilise resources more efficiently (e.g. reduction in carbon footprints) is increasing. The digital economy does appear to provide opportunity to contribute positively to those objectives through more effective networking, communication (including travel substitution) and business processes with more efficient delivery of outcomes.

4. Participating In The Digital Economy

4.1 A Virtuous Circle

The digital economy may be represented as a virtuous circle, each component of the circle essential for the others and building the economy further as each component grows.

Digital Economy

4.2 Information Management

Information management is an increasing challenge as more data is collected and being sought by an increasing diversity of data users. Collection and storage of data are costs that the social or commercial justification cannot always be identified at the time of collection and initial storage. The challenge is to identify what type of time sensitive data needs to be collected for future analysis or research. It is often unclear what trends will be useful in 10 years time to apply to future decision making, and accordingly what data and conditions need to be associated. This clearly illustrates the closing of the virtuous circle following service creation and subsequent data gathering which refines requirements for new data sets.

4.2.1 Data Warehousing

Information warehousing is a growing challenge from a maintenance perspective. Who will pay for storage of data, which may not be used for 10 years? There is clearly a national and global interest in collecting, storing and enabling retrieval of relevant data. Data may be held in a diversity of repositories and access to and knowing where relevant information is held (including maintaining metadata/cataloguing) is an essential part of the warehousing process.

4.2.2 Information Overload

The challenge arising from the improved access to an ever-increasing body of information including with the diversity of professional and social network information sources (just consider the volume of data continually being loaded to YouTube alone) is how to ensure that the best relevant information an individual requires is delivered to that person. It is possible to build profiles of individuals’ interests (privacy considerations permitting) and, with context awareness (e.g. location, status), which allows intelligence in the applications to deliver the best information available at the right time in an optimum form.

Context awareness (a variant of unified communications) to deliver the right information at the right time will become essential. Data mining and rules-based services provide intelligence for such targeted and effective information and service delivery.

4.2.3 Context Awareness

Context awareness includes individual (or corporate) location and status attributes and increasingly as more information is gathered about individuals (in particular through knowledge of web use), resulting in improved profiling of behaviours individually and in groups. Much of this information can be collected in relationship management systems.

4.2.4 The Power of Search

The use of search engines to aid location of information, in response to key words and queries is now well established. It has become an essential component of Internet-based research. As more information becomes addressable by Internet search, the ability to filter information to what is really important becomes an essential management tool. By learning individual, group or professional search patterns, and identifying sites which are often consulted (including as a result of searches), together with sites which are regarded (by the group) as preferential sources of information in particular areas, more targeted search results should be possible.

Google Search Appliance (GSA) for instance can improve document manageability and document discovery based on context and search terms. Even unstructured data can be searched to deliver structured content based on context and rules, avoiding the need for complex filing systems which are inflexible to changing context. Searchability of information on the corporate web site could be enhanced, by identifying information patterns for tagging.

Powerful search facilities should be an essential feature of the web services through intelligent search capabilities. Networks with specialist interests can build libraries of Internet resources to create various bodies of knowledge.

4.3 New Services

The Internet provides opportunity to innovate the provision of services. This will serve to ensure an increasing focus on the “digital economy”, where access to and presentation of information is becoming increasingly important for creating a competitive edge via enhanced features and simpler delivery of services more efficiently. To underpin this shift will require ubiquitous broadband access such as that planned for the National Broadband Network, albeit that participation in the digital economy can truly be ubiquitous with the availability of lower priced broadband access services than that envisaged for NBN. Further it will also require facilities based (Layer 3) Service Providers to provide the necessary service performance characteristics to support these innovations and service paradigms.

The following sections describe some of the tools available for creating improved services.

4.3.1 Services in the Cloud

Supply and support of services “in the cloud” (including software-as-a-service) has attracted considerable interest with the benefits of lower cost of supporting office applications albeit with a need to manage security, broadband connectivity and service reliability to ensure the benefits flow to the business. Google has been AAPT White Paper Series Opportunity Knocks: Moving to a Digital Economy 11 particularly successful with its Google Apps and in particular Gmail in building substantial services in the cloud. Care should be exercised in assessing the cost performance tradeoffs in taking services in the cloud.

4.3.2 Web 2.0

Web 2.0 provides for personalisation of the Internet experience and the electronic services, which required. It provides a platform for social media and user generated content. Web 2.0, the next generation Internet, is variously defined and typically includes the ability to personalise web experience rather than being limited to static web pages. Web 2.0 facilitates the linking of information of relevance to the individual user. Bringing geographic and status information together is a simple Web2.0 application (mash-up).

The digital economy and web 2.0 depends on access to information. A recent report by the Gov2.0 Taskforce Engage: Getting on with Government 2.0 Gov2.0 Taskforce, 22 December 20093 and the Government’s response Government’s response to Engage: Getting on with Government 2.0 May 20104, provide ample evidence that the government intends to support these enablers. As the reports indicate there remain many barriers. Private sector information is generally less publicly accessible for commercial reasons.

4.3.3 Social Media

The ability of the Internet to connect and communicate has led to perhaps the most significant current influence of the Internet - social media. Social media has been defined as Websites which are built on Web 2.0 technologies to provide space for indepth social interaction, community formation, and the tackling of collaborative projects5. Social media allow participants to form groups of common interest, mainly social and including professional (eg Linkedin). Social media include Twitter, MySpace, Facebook and Bebo. Social networking also occurs through blogs and Wikis, as well as podcasts, email and instant messaging.

A recent special report in the Economist6 identifies the opportunity available through access to enormous markets comprising social networks with an estimated 140 million accessing social networks through mobile phones.

4.3.4 User Generated Content

Social Media fosters user-generated content. Some useful research has been undertaken by the Smart Services CRC into the social drivers behind growing participation in user content generation7. It is clear from this work that business can leverage the activities of users to advance their business interests as well as those of the user.

4.3.5 Capturing Processes as Services

Every organisational process can be broken down into distinct services and the delivery of electronic services allows such services to be combined into new processes, to target or add new value to the services provided. This is the Internet of services8. The Internet of things9 connects all addressable objects into this new world of services. Data mining and rules-based services provide intelligence to enable more targeted and effective services.

For instance, a group may wish to provide a service for its constituent members, which is comprised of a number of services drawing on publicly available information sources, an internet of services. By embodying its processes as services and combining those services with others, customers could improve the diversity and flexibility of services.

Privacy issues need to be taken into account, in particular regarding data collection and its use for purposes other than that for which it was collected.

4.3.6 Collaboration

Business is increasingly recognising the value, which can be gained from the use of collaboration tools, not only in the greater efficiency in achieving outcomes but also the benefit of stakeholder engagement. Collaboration tools also offer a significant travel substitution benefit in travel time and cost savings. The increased in the use of products such as Cisco’s recently acquired WebEx, Google Docs and Atlassian’s Confluence, are all examples of collaboration tools with different capabilities.

4.3.7 Visualisation and Immersive Environments

The emergence of virtual worlds such as Second Life and gaming environments, whilst initially primarily of entertainment value, provide a precursor to more significant commercial, educational and other applications.

Immersive environments in which the user becomes part of a scene (e.g. Second Life) are increasingly relevant with the prospect of many users from around the world joining a common virtual meeting (for instance on a private island).

The desire to simulate real world environments in a virtual space is of the increasing interest to counter time inefficient and potentially non-sustainable practices such as travel (for cost and/or environmental reasons). As simulation of environments becomes increasingly tangible and bandwidth efficient, including for multi site engagement and for collaborative activities, so too does the interest in virtual worlds and serious gaming.

The application to online learning and eEducation is gaining interest in particular where teaching resources are limited or students are widely dispersed (including overseas). It is possible generate classroom environments among participants in many different physical locations. This type of application should be of interest to corporations providing in service or even specialist advanced training to staff in multiple locations.

Visualisation provides tools to allow multiple data sets to be represented in 3 or more dimensions. The Internet provides the infrastructure necessary to enable access and bring the data sets together. High performance computing provides the capability to correlate and display the data to deliver outputs using telecommunications networks.

4.4 Challenges

4.4.1 Inadequate Investment

Inadequate investment is one of the major threats to successful engagement in the digital economy. The challenge for business is that the financial benefits are typically indirect. Information systems are seen as a cost, not a generator of revenue. However, information systems are an integral part of generating revenue as they will be increasingly in the digital economy. Investment therefore needs to be commensurate with successful engagement in the digital economy to ensure that all parts of a business have the necessary tools to participate/compete in this new environment.

4.4.2 Disruptive Service and Change Management

The Internet is clearly a disruptive technology. Internet is an agent for changing the way processes (services) are implemented and provides the opportunity for innovation and considerable changes in the cost structures of services. Change often creates barriers, and organisations which can most efficiently cross those barriers will reap rewards.

Organisations which best manage the changes within their organisation will derive maximum benefit from the digital economy. It must also be recognised that the digital economy facilitates continual change and there is a need to continually adapt and change processes to reap the continuing benefits and maintain competitive advantage. Loosely coupled systems are essential in facilitating change without “forklift” upgrade and substantial consequential disruption and allow staged implementation, whilst maintaining normal business capabilities.

4.4.3 Trust, Security & Privacy

Trust, security (including authentication and authorisation) and privacy will always be presented as barriers to greater connectedness and use of electronic services. One of the most important weapons in establishing robust trust and privacy is good training of staff to recognise the need for constant vigilance in these matters and implement appropriate safeguards. It should be recognised that some individuals will always strive to breach trust and privacy protocols, whether in an electronic or physical domain. Systems must be built with appropriate safeguards, and monitoring for inappropriate practices should be possible without breaching privacy. Trust, privacy and security are important matters to be considered for participating in the digital economy. However, using them as a barrier to participation is not appropriate. The solutions will need to be implemented and appropriately utilised and monitored.

4.4.4 Skills Requirements

The demand on skills in information and communications technologies (ICT) to support the digital economy will continue to increase10. Organisations with access to adequate skills will be better placed to take advantage of innovative opportunities to utilise electronic based services. Organisations which recognise those skills, as essential foundation for the continued prosperity of their business, will better survive the disruptive mature of the Internet. Cutting costs in supporting the digital economy is likely to put organisations at a medium and long-term disadvantage. The digital economy is evolving at a pace, which will mean that companies falling behind will need to innovate in order to remain competitive. Maintaining a core of in-house skills will be essential for most companies, with reliance on outsourcing for non-core and non critical areas of business.

In house development of capabilities is likely to become a strategic issue for companies increasingly dependent on information and communications technology. Whilst obtaining services in the cloud may reduce some demands in operational areas, the need for planning and a strategic approach for using new forms of service delivery will also be increasingly important.

5. Conclusions

Without doubt the Internet is an essential enabler of the digital economy. Some may claim that the digital economy is rapidly becoming the economy with very little commerce being possible without some Internet participation. The ubiquitous Internet allows anyone to participate in the economy wherever they are in the world. It’s a truly global village with new opportunities as well as threats. Leveraging the opportunities of the Internet will become increasingly important for remaining competitive in the global economy. The internet enables innovation and it is essential for competitive economies to continually innovate. Without innovation, other economies will be able to take competitive advantages from the application of the Internet.

Telecommunications is an essential enabler with increasing reliance being placed on networks to support changing approaches to business operations (including computing in the cloud). Business needs to be increasingly conscious of the need for adequate service levels including reliability (in all elements of the internet supply chain) with commensurate attention to network redundancy and business continuity/recovery plans, noting the increasing impact on business of the loss of internet access.

Opportunity knocks for those prepared for change by embracing the digital economy. Not unlike the agricultural and industrial revolutions that preceded it, there will be little choice but to embrace the digital economy. Those who ignore the changes, which are happening now, will inevitably decline economically and competitively relative to the adopters. That is not to ignore the risks of a highly connected society on a global scale. It is essential that society is eternally vigilant to suppress undesirable consequences of the digital economy, and ensure that suitable safeguards are available to avoid exploitation of the kind, which was enabled by the agricultural and industrial revolutions.

1 Digital Economy: Where are we heading, Presentation to Australian Computer Society TSIG 26 February 2010, Peter Hitchiner
5 Social Media: Tools for User-Generated Content vol 1 State of the Art p5 http://www.smartservicescrc.com.au/PDF/Social_Media_State_of_the%20Art_March2009.pdf
6 A world of connections, a special report on social networking, The Economist January 30 2010
7 Social Media: Tools for User-Generated Content vol 2 User Engagement Strategies http://www.smartservicescrc.com.au/PDF/Social-Media-Volume2-User-Engagement-Strategies.pdf
8 Refer to European Commission programs on the Future Internet http://cordis.europa.eu/fp7/ict/ssai/home_en.html and as an example www.ffg.at/getdownload.php?id=2750
9 Seminal ITU report http://www.itu.int/osg/spu/publications/internetofthings/InternetofThings_summary.pdf
10 The ACS ICT Statistical Compendium 2009 shows a steady increase in demand for ICT skills http://www.acs.org.au/attachments/ICTStatsCompendium.pdf (page 36)


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